Gold is usually associated with a precious metal that could be used to protect capital in difficult markets and economic times. Undoubtedly, we are facing such an environment in 2022, and gold expressed in U.S. dollars appears to have fallen for the sixth consecutive month.
Gold and the foreign exchange market
Mostly, when we talk about the price of gold, we talk about it expressed in U.S. dollars, because this is also how the commodity is quoted on global financial markets. The gold price in USD seems to have fallen for the sixth consecutive month, a series not seen since 2018. From its peak in March 2022 to its lowest level in September 2022, the gold price fell by 22 percent. On the Conotoxia MT5 platform, this month's low was set at $1614.80. This was the lowest level since April 2020.
Source: Conotoxia MT5, XAUUSD, MN
Gold in other currencies
Nevertheless, gold in currencies other than the USD seems to have gained this year. This in turn may be due to the fact that these currencies may have lost more to the USD than gold has lost. Gold denominated in the Polish zloty has gained 12 percent since the beginning of the year, while gold in PLN has become 18 percent more expensive in relation to September 2021. Britons, who are also now facing the weakest pound in history, if they had bought gold earlier, may have preserved the purchasing value of their currency. Since the beginning of 2022, the gold rate in British pounds has risen by 10 percent, and on an annual basis by almost 15 percent. And the Japanese, whose currency in relation to the USD was the weakest since the 1990s, can't complain about gold either. There, on an annual basis between September 2021 and September 2022, the price of gold rose by 23 percent. As can be seen from the above, gold in a large part of the world's countries has managed to preserve the value of local money. Only Americans can complain about the current prices of yellow metal.
Technical analysis of XAU/USD
Source: Conotoxia MT5, XAU/USD, MN
From the point of view of technical analysis, the price of gold may have reached potential support. We are talking about the 50% Fibonacci retracement of the upward movement from August 2018. In addition, a potential correction (abc) could have appeared on the chart in 2016-2018. Now in 2020-2022, a correction (abc) could also appear. What may be important for corrective structures is the equality of their formation over time. This equality was reached this month.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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